Social investment in the digital era – avoiding a new moral hazard

I recently published an opinion piece that was picked up by the Australian and the Business Spectator. I have reproduced the original article for this blog.

Providing social protection in line with economic development faces challenging times. While labour mobility is a cornerstone for economic growth, the lack of employment opportunity with adequate social protection for people with disabilities and an ever-growing migrant population, both contribute to social and economic disruption. A new challenge is the digital economy and how it disrupts traditional labour markets.

Think of new business models like Uber and Airbnb; digital disruption is contributing to global growth, while simultaneously adding to instability in financial and labour markets. As Australia readies itself to embark upon a period of innovation, getting this balance right is key to our country’s future economic prosperity.

With the SAP Institute for Digital Government (SIDG), which we formally launched in October, we aim to provide a forum enabling discussions addressing these topics. Already, the SIDG has helped uncover and define the scale of the opportunities and challenges opening up as social protection becomes increasingly tailored and targeted, which is made possible thanks to new digital technology.

Social protection spending is one of the big-ticket items for governments, including Australia, with average expenditure across OECD countries 22 per cent of GDP. There is significant scope to improve the social and economic outcomes of these payments by shifting away from a one-size-fits-all approach towards a model incorporating targeted policy and service delivery. Rapidly developing digital technology, including advanced analytics, means we now have the capabilities to do this. Across the globe, nations are examining how they can turn the social protection system into an investment in social capital rather than a necessary expense. Australia’s National Insurance Disability Scheme (NDIS) is an example of this new way of thinking. While incorporating the important safety-net-like features of support to assist in daily living, the NDIS has an investment approach to key social areas including education, skills development and assistive technology.

The NDIS’s aim, through empowerment and choice, is to increase people’s capability and capacity for achieving their aspirations. Fostering an attachment to the labour market has a wide range of long term and on-going social and economic benefits for individuals and their families, and as the Productivity Commission concluded, is better for society as whole. A new moral hazard At the SIDG, we are privileged to work with government organisations in many countries. We have a ringside view on innovation that is overhauling disability support and other aspects of social protection. The NDIS is a great example of what can be done and of course, we are excited by what lies ahead. However, we don’t want projects to run off the rails because too much attention was paid to the technology and not enough on processes and safeguards.